Freight brokerages have existed for years and have become even more critical now than they were in the past due to the increased global trade. A freight broker plays an essential role in this industry by bringing buyers and sellers together to negotiate the best price for the shipping services they need. In many cases, a freight broker may not act as an agent on behalf of one individual buyer or seller but may act as an intermediary. They usually charge a commission for their work. Still, they provide a valuable service in helping to make sure that there is a market for a given service, allowing people to get the products or services they need on time.
Types of freight brokers
There are many types of freight brokers. The most common are those who work through the significant freight brokerage firms in the United States and Canada. However, there are also independent freight brokers that have formed partnerships with these larger firms. Some independent brokers are called “third-party motor carriers,” while others are considered brokers that provide a list of available carriers.
Responsibilities that freight brokerage firms must fulfill
There are many different responsibilities that freight brokerage firms must fulfill to be legal. They are responsible for providing a list of carriers that are available to do business with. They have to perform a thorough evaluation of each carrier to determine whether they will provide the needed services. In addition, freight brokerage firms must evaluate the proposals of each shipping services company and evaluate the tenders that companies submit to secure funding for shipment. Finally, they have to keep up with all applicable documentation and reporting requirements that various transportation agencies require to operate lawfully.
The most important part of the supply chain is the shipping agency. Suppose the transportation agency does not correctly assess the needs of the shippers. In that case, the transportation providers may choose to bypass this critical step and let the shippers work with companies that do not provide the needed services. For example, if there is a deficit between the amount of available product and the demand for that product, the shippers will be able to ship goods where they are wanted but without the ability to pay for the goods. This means that the transportation agency may choose to work with shippers that cannot pay for the goods that they need. By allowing shipments to go to companies that can pay, the freight brokerage firm is helping ensure that there is a demand for the product and that the companies who receive the shipment are capable of fulfilling their part in the supply chain.
While some people are happy to know that the freight brokerage firm is doing all of the paperwork and checking to ensure no problems are associated with shippers, some shippers want more control. Freight brokers usually have direct access to motor carriers and therefore can influence the use of those carriers. For example, if a freight brokerage firm has a large client base, the service may use one carrier to make a profit. The shippers who have control over the transportation of their goods prefer this scenario because they can ensure that they get the best services possible.
Is being a freight broker stressful?
Freight brokers do not always make good business relationships with the carriers that they work with. If a freight brokerage firm does not have enough of a relationship with a specific carrier, it can pressure the carrier to undersell. This can be bad news for shippers because the lower prices they can for shipments will generate a higher bottom line. Having a bad relationship with a carrier could also have an indirect effect on the cost of the cargo. For example, if the carrier sends the shippers an invoice for services they did not provide, they may consider hiring a new carrier to avoid being assessed late fees.
A freight brokerage firm can also put a strain on the transportation management system that is in place. Suppose a shipper contacts a brokerage firm regularly for estimates or quotes. In that case, the transportation management system may not accurately calculate how much money the carrier should charge based on the type and location of the shipment. The result could be an undercharge for the shipper, leading to the shipper not getting paid at the end of the day.
Freight brokers often choose to work with shippers that are not highly liquid. Many logistics brokerage companies only work with larger carriers and are often unable to meet the needs of smaller carriers. Because of this, the shippers that work with these types of firms are often charged with more than they should be. Working with a geographically limited company can create logistical problems for shippers who need to get shipments to their customers on time. The transportation management system of a company that works with logistics brokerage companies should include provisions that allow for flexibility when choosing the best carrier according to the size of the shipment.
